D'ALMEIDA, Mr Rehan, Chief Executive Officer, FinTech Australia [by video link] MORGAN, Mr Jack, Head, Policy, FinTech Australia [by video link] MOTT, Mr Jonathan, Head, Banks Research Analyst, Barrenjoey [by video link] [09:44] CHAIR: Welcome. While we wait for Barrenjoey to come online, I'll just confirm you have received the information about parliamentary privilege and the protection of witnesses giving evidence to Senate committees. Mr D'Almeida : Yes, we have CHAIR: While we wait for the other witness, do you have a brief opening statement? Mr D'Almeida : Yes, we do. CHAIR: Go ahead. Mr D'Almeida : Thank you, Chair and members of the committee, for the opportunity to appear today. FinTech Australia is the peak industry body representing Australia's financial technology sector. Our members range from early-stage startups through to established providers operating across payments, lending, wealth tech, wealth management, regtech, open banking, digital assets, artificial intelligence and digital identity. Our central message today is simple: fintech is the productivity infrastructure for the Australian economy, not just an industry that operates in isolation. Productivity growth increasingly comes from reducing friction, helping businesses transact more efficiently, improving the allocation of capital, lowering compliance costs and giving consumers better access to financial services. Fintech is enabling each of these outcomes. This is borne out by the evidence. A recent Deloitte national study found that 79 per cent of Australian fintechs identify improving business productivity as their primary source of value creation, ahead of every other benefit. These businesses are digitising workflows, reducing fraud, lowering transaction costs, improving data quality and automating manual processes across the economy. They contribute directly to sectors as diverse as housing, agriculture, health, retail and government. The opportunity extends well beyond fintech itself. The Productivity Commission has estimated that mature economy-wide data sharing could contribute around $10 billion annually to the Australian economy. The consumer data right is a foundational part of that opportunity. When implemented effectively it reduces search and switching costs, it improves competition, supports better lending decisions and enables innovative services that help households and businesses make better financial decisions. One particularly important next step is the inclusion of ATO tax data within the Consumer Data Right. Secure consumer directed access to verify tax information would streamline mortgage and business lending by reducing documentation requirements, accelerating income verification and improving credit assessments. It illustrates how well-designed data-sharing reforms can simultaneously improve productivity, competition and consumer outcomes. The CDR is particularly relevant to this committee's interest in housing finance. Open banking, digital ID, AI enabled credit assessment and modern payments infrastructure have the potential to reduce the time and costs involved in obtaining and refinancing a mortgage, increased competition between lenders and improved access to finance, particularly for consumers and small businesses whose circumstances are not well served by traditional assessment models. Australia is not short of innovative businesses. The challenge is ensuring they can scale here. Across our submissions to the committee, the Productivity Commission and Treasury, a consistent theme emerges: young, innovative businesses continue to face unnecessary barriers to growth, access to investment, uncertainty around venture capital settings, access to banking services and payments infrastructure, and delays in implementing productivity-enhancing reforms, such as the Consumer Data Right. These issues may appear technical in isolation but together they determine whether innovative firms can compete, whether new technologies diffuse through the economy and, ultimately, whether Australia lifts its long-run productivity performance. Our message today is that productivity policy should focus on removing barriers to business dynamism, encouraging long-term investment and accelerating the adoption of technologies that reduce friction across the economy. If we get these settings right, we won't simply build a larger fintech sector; we'll build a more productive Australian economy. CHAIR: My first question is about mortgage innovation. What exactly do you think should be done to get more competition and more innovation in mortgages? Mr D'Almeida : The key one, from our position, is similar to what NAB mentioned previously. It's that access to data and streamlining the flow of data will enable faster decision-making and the reduction of fraud. A key element of that, alongside the Consumer Data Right, is access to ATO data through the Consumer Data Right. That creates a secure approach to sharing information from the ATO directly with decision-makers that can enable faster lending decisions. CHAIR: What's the barrier to that happening? Mr D'Almeida : Getting access to ATO data, primarily, which is, of course, a big project in itself. We do believe, when we work through the use cases, there is an opportunity to find the right cost-effective approach to make it happen. CHAIR: So it's a decision of the government that's needed, is it? Mr D'Almeida : Yes. CHAIR: Do you think that would help address the fraud issues, as well? Mr D'Almeida : Absolutely. This is the opportunity to disintermediate the user from having the opportunity to manipulate that information. If it goes directly from the ATO into the bank or the fintech or the third-party decision-maker, there's no way for the document to be manipulated. CHAIR: What about the issue of macroprudential tools and the way that APRA deploys them? Are there any things that could be done there to help promote competition and innovation? Mr D'Almeida : I'll have to take that on notice. Jack, do you have any thoughts here? Mr Morgan : I do, but I think we'll set them out in detail on notice. Mr D'Almeida : Yes. CHAIR: What about different types of mortgages? What are the prospects for getting different types of mortgages into Australia? Mr D'Almeida : What do you mean by different types? CHAIR: Rather than them all being long-term variable interest. Mr D'Almeida : I'll have to check with our members before I have a comprehensive response for you, so I'd like to take that on notice. CHAIR: So your main point is that you think getting access to the CDR tax data would help generate more competition and deal with the fraud issues? Mr D'Almeida : Absolutely. CHAIR: Do you have any other principle points? That's your major ask, is it, in terms of financing and mortgages and that sort of policy? Mr D'Almeida : Access to the Consumer Data Right and ensuring there's a more streamlined flow of information and not just limiting it to ATO data but also having further development of the Consumer Data Right is the key ask. CHAIR: I understand that Barrenjoey has now joined us. Mr Mott, are you there? Mr D'Almeida : I think he's on mute. CHAIR: He'll solve that, I'm sure. While he's doing that, I understand Senator Darmanin has a couple of questions for FinTech Australia. Senator DARMANIN: In your submission, you made some comments around state procurement frameworks favouring large, established vendors and that including smaller fintechs would increase competition. What do you think would be useful to make some changes there? Mr D'Almeida: There is an opportunity for government at both the state and federal levels to really open up their procurement processes to early-stage and more established fintech companies. A good example of that is the New South Wales Treasury opening up their payments and banking support tender to both fintechs and banks and traditional financial institutions. It's still in early development, and, as I understand, the New South Wales Treasury is building frameworks to better enable fintechs to work directly with state government. This is an opportunity for government to have these procurement processes be developed such that fintechs also have the opportunity to present as well as provide their services, technology and early technologies that can really enable productivity within government so that they can access these fintech services. At its current state, there is no clear process for fintechs to be pitching their solutions to government. Senator DARMANIN: Do you think that's a large opportunity? Can you give us a sense of how that would contribute to the growth of some other parts of fintech sector? Mr D'Almeida : A good example of this that I have stated in the past is within the public transport system. We have Australia based payment companies that can provide tap-to-pay services for the public transport system as these public transport systems are upgrading their technologies. However, as we've seen, a number of state governments have continued to procure these technology solutions from international markets and from other areas while the local fintech that has the technology is providing its solutions to Washington and to London and to those larger, more developed markets but still doesn't have the opportunity to provide their services here in Australia itself. That's a good example of supporting local innovation for the local market and then being able to further support jobs and innovation in Australia itself. Senator DARMANIN: You mentioned earlier—I think it was in your opening statement—this comment around an AI enabled credit assessment. Can you talk a bit about how we balance up the risks around an increasing use of AI. There has been a bit of a theme already around increasing fraudulent loans and the like. How do we balance those things? Mr D'Almeida : That is part of what I mentioned with the ATO data access. There are opportunities for not just reducing friction but also enabling the transfer of information directly from the source to the decision-maker. That way, you don't have AI with access to this information able to manipulate the data. That is a key ask that we believe can reduce fraud in a number of ways. However, AI is a growing threat in every form. If not regulated, the challenges as new consumers begin to trust AI and do things manually by themselves—there's more risk for the consumer as they start downloading information and sharing it with their AI of choice to get answers to questions, apply for loans or make any of those decisions. The real need here is to regulate it such that information is protected and ensure that data safety and data privacy are maintained. Senator DARMANIN: Great. Thanks. CHAIR: Senator Ananda-Rajah? Senator ANANDA-RAJAH: I have a question regarding Consumer Data Right. We have now opened this up to non-market lenders. I guess that's you or many of your members. Can you just talk us through what this means for your sector and for consumers. Mr D'Almeida : Absolutely. There's huge benefit for the consumer—with the ability now for decision-making to go beyond just the banks to be able to share their overall data based on any lender that they are currently utilising or using for their lending services. This really opens up the opportunity for them to get a more holistic view of their mortgage or the lending service that they're accessing. This could enable better switching, better cost, faster switching and faster decision-making for the switching as it is enabled through data sharing via the CDR. Previously it would have had to be more manual, with information being downloaded and then uploaded, or, as we've discussed previously—the ability to manipulate that information using AI or whatever is accessible to these users. So we do see this opportunity opening more competition and more choice for the consumer and business. Senator ANANDA-RAJAH: What is the sector doing to increase uptake of the CDR amongst consumers? My understanding is that we have about 1.3 million Australians who have signed up to this. It's voluntary. Not many people know about it actually, but just about everyone touches a financial institution at some point, so what sort of thinking is going on within the sector to increase uptake? Mr D'Almeida : The key approach continues to be not about direct consumer education about the Consumer Data Right—it may be unnecessary in a lot of situations—but to streamline the approach for sharing data and the consent flows that happen when a consumer is asked to share their data. There's a lot of mistrust from consumers when they're asked to share their data with a third party. So to be more clear about what they are actually enabling and how this is safer than traditional approaches—they were previously asked to upload information or share it via email, which can be a lot less secure—the industry is doing a lot in terms of those consent flows. However, there's still a long way to go to ensure consumers—I believe consumers do not need to understand that they're sharing data via the CDR, but they need to know that the traditional approaches for sharing the data have higher risk, are less secure and can lead to more issues in the future. Senator ANANDA-RAJAH: Walk me through how a consumer is signed up to this, then, during a transaction—say they want to switch loans or something like that? Mr D'Almeida : If they're applying for a loan, when they apply through the service provider that would assess them—whether it's a broker, it's directly with a bank or it's a fintech—the app or the website would ask them for access to their data, and they have to give consent. When they provide consent, then the technology or app has access to the transaction information from their previous service provider. But those consent flows can be a little cumbersome, and consumers may feel that they don't trust the system that they're using to share the data. There are certain instances where different apps and different banks have different messages on what it means to share data, so it may create more fear within the ecosystem of consumers when they have to give their consent. A large part of this is also about having clear communication on why this is a safer approach to sharing their data versus traditional approaches. Senator ANANDA-RAJAH: On that point, what is FinTech Australia doing to increase trust in this sort of information-sharing platform? Mr D'Almeida : Currently, most of our work is through the consultation process. We work very closely with Treasury and work closely with the Data Standards Body to ensure that the standards are streamlined such that communication can be clear on why this is the safer approach to sharing your data. CHAIR: Thank you. Mr Mott, do you have any brief opening comments? Mr Mott : Yes I do. I'll read that now. Thank you for the opportunity to talk on the availability of credit and competition in housing finance. Today I'm going to provide you with some positive news. As a starting point, Australia has one of the most efficient and competitive banking systems in the world, which provides credit efficiently to Australian households within the constraints of the responsible lending laws and the Hayne royal commission of 2018-19. The dynamics of housing finance have changed dramatically over the last 20 years, with mortgage brokers now originating about 80 per cent of home loans. These brokers are responsible for finding the best products and pricing for their clients. Another dynamic in the housing market has been the rapid rise of Macquarie Bank. Today Macquarie provides about 7¼ per cent of all housing credit in Australia. It's up from only three per cent five years ago. Macquarie is growing at 28 per cent per annum—which is four times systems level—and now has a $180 billion mortgage book roughly the same size as Bendigo Bank, the Bank of Queensland and ING combined. Macquarie offers very efficient technology, turnaround times and product and pricing which is well received by the brokers and their customers. This intense competition has seen the margin that banks are making on their mortgages fall sharply over the last decade. Ten years ago, the banks were generating a return on equity of around 25 to 30 per cent on their mortgage books. Today it's below their cost of capital, at about eight or nine per cent. Even over the last few weeks we've seen a renewed bout of competition in housing finance. Three weeks ago, the Commonwealth Bank of Australia reduced their mortgage rates on new business by between five and eight basis points on average. The other banks have since matched that and sometimes bettered it. Then the CBA actually went again. Even this morning, Bendigo reduced a lot of their mortgage pricing. This will flow through to mortgage customers over time as they refinance their loans or contact their bank or their broker to ask for a better rate. Once again, this will push the returns the banks are generating on their mortgage book back below their cost of capital. Competition for housing finance has never been greater than it has been in the last few years. If we also look at the availability of credit, based on the ABS statistics for the quarter to the end of March, we can see that, over the last three years, owner occupied credit has risen 42 per cent and investor finance is up by 85 per cent. Over the last year alone, the banks have lent $400 billion in new credit to the housing market, and housing credit growth—so the outstanding stock—is growing at about 7½ per cent per annum. However, since February, following three rate hikes, a war and the tax changes with the budget, housing lending has fallen quite sharply. We put out some research this morning on data from Loan Market Group, which is Australia's largest mortgage aggregator, which shows that home loan applications are down around 23 per cent since the start of February. Within this, mortgage applications for first home buyers are down 19 per cent. Owner occupied upgraders are down 15 per cent, while investors are down 35 per cent. These are all seasonally adjusted. It should be noted that this is mainly as a result of a reduction in demand; it is not as a result of change in underwriting standards by the banks. One area of concern is the distribution of this credit. Higher interest rates since 2023 have materially reduced borrowing capacity under the responsible lending laws enforced by APRA and ASIC, Combined with house price appreciation over this period, especially outside Sydney and Melbourne, borrowing has become increasingly skewed to the rich. I'm going to put this into perspective, and this is based on numbers from the Commonwealth Bank of Australia through to December 2025. Twice as much money is now being lent to investors who earn more than half a million dollars per annum than to all households who earn less than $125,000 per annum to buy their own home. Housing credit is freely available, but in a high inflation and high interest rate environment, buying a house has increasingly become a luxury good. Thank you for the time. I'm happy to take any questions. CHAIR: Effectively you're saying that it's very difficult at the moment for first home buyers, and that first home buyers are not able to easily get into the market. Mr Mott : That comes down to housing affordability and the availability of housing. That's a supply issue that we've all been talking about for some time. The price of housing has become extremely difficult, which makes it hard for first home buyers to get into the housing market. I think that's a well-known statement. CHAIR: What could be done to help get more wholesale financing to builders and developers? Mr Mott : I'm a banks analyst. I don't really know specifically about the building industry itself. That's probably something you should ask the builders and the banks rather than specifically in that topic— CHAIR: In terms of the retail side, where mortgages are applied for, is there anything that could be done to help individuals get access to finance? Mr Mott : I think that's the key point. The banks are lending very freely at the moment. They're trying as best they can to lend. The problem is that housing affordability has become so stretched that a lot of young Australians, first home buyers and people on median incomes are struggling to get into the housing market because of housing affordability. That becomes a function of house prices and the affordability. Rather than the banks going and saying, 'Hey, we need to lend more,' the challenge is house prices. CHAIR: So, effectively, it comes back to our old friend of supply. We haven't built enough, and therefore the prices— Mr Mott : Absolutely. I think we'd all love to have. Given the rapid growth in the population that Australia is experiencing, we need to build more houses. We need to build more apartments. We need to turn over the velocity of housing needs to improve so that older Australians who are now in the empty nester stage can move on and free up bedrooms to all Australians. I think improving the supply and availability of housing would be a fantastic outcome. If we could have a situation where house prices were flat for 10 to 15 years in nominal terms and fell in real terms, improving affordability, that would be a great outcome for all Australians. CHAIR: In summary, the data that you read into the record at the start is quite shocking. Your effective position is that this is a supply challenge. We need to build more houses to reduce the price, and you're not recommending any changes on the demand side. Mr Mott : On the demand side, people want to move into their houses. It's a supply issue. I think it's well known that we need to build more houses across the spectrum, not just for first home buyers. We need more houses for first home buyers, for families and—this is probably the one that's talked about the least—for downsizers. As the population ages and a lot of people are now moving from their family home as they become empty nesters and before they move into aged care, we need to have more housing stock for those downsizers to enable the velocity of housing to turn over so that we can improve the turnover and people moving into houses. There are a lot of empty bedrooms in Australia. I think the statistic I saw was 13 million empty bedrooms, and a lot of those are people whose children have left home. Not all of them want to downsize. Some of them do. But, if we can do that, it would really help the supply. But you are quite correct—it comes down to the supply of housing that we need to address. CHAIR: I note your comments about Macquarie Bank developing as a stronger player. What sort of money are the banks making out of mortgages in Australia? Mr Mott : Yes, that's a great point. The return on equity that the banks generate on their mortgages has come down dramatically over the last few years. That's a result of, No. 1, mortgage brokers, which are really helping people find the best deal. Remember that they're paid to get customers the best deal for their mortgage. And then new players like Macquarie come in and drive down the margins the banks are earning. The way we think about it is: what's the return on the equity that they're generating? If we went back to before the royal commission, say around the middle of last decade, 2015, the banks were generating 25 to 30 per cent return on equity on their mortgages. Today, it's at or below their cost of capital, which is around eight to nine per cent. They're making a higher return on equity on their proprietary loans than they are on their broker originated loans. But it's very competitive. That is a result of (1) the mortgage broker industry coming in and (2) new players like Macquarie entering the housing market. CHAIR: Do you think we still need the four-pillars policy? Mr Mott : I would not like to see the four major banks consolidate. I don't think that would necessarily be in anyone's interest outside another financial crisis, and hopefully we don't have another one of those any time soon. But I think what we are increasingly seeing is the four major banks and Macquarie becoming bigger and bigger players. That's because, as Rehan was saying before, we are now seeing technology. We are now seeing competition. We're now seeing prices being driven lower, and it makes it increasingly difficult for some of the more traditional, smaller players to compete. People have gone from banking locally to using technology to bank, and that's one of the—I think there were some great comments there. I think we need to see more of that to drive competition. CHAIR: Thanks, Mr Mott. Thanks for your evidence. Proceedings suspended from 10:15 to 10:29 .